ETHICS IN THE DIGITAL AGE: ADAPTING AUDITING PRACTICES FOR TECHNOLOGICAL CHALLENGES

Nizar AL-SHARIF

Independent consultant to TGS www. tgs-global.com

In the rapidly evolving landscape of modern business and technology, auditors face unique ethical challenges stemming from the integration of digital tools, data analytics, and automation into financial auditing processes. Ensuring the integrity, objectivity, and independence of audits has never been as much difficult for auditors who navigate these technological advancements.

TGS will encounter upcoming challenges related to staying updated and addressing technology challenges effectively. To ensure not falling behind, TGS needs to focus on two key aspects: staying informed about these developments and actively participating in continuous professional development. Additionally, regulatory guidance and oversight, supported by adaptable standards that keep pace with technological advancements, are crucial, efforts have been made to integrate the code of ethics to firms’ values and quality manuals.

Regulatory bodies, including the PCAOB and the IAASB, are taking proactive steps by introducing oversight programs to anticipate and respond to the risks associated with emerging technologies. In practical terms, major firms like the Big4 are already deeply involved in integrating AI-based risk assessment techniques. They are using automated systems to review all transactions for anomalies, check ledgers for discrepancies, identify misstatements, and detect fraudulent information. Furthermore, they are exploring innovative tools such as drones for conducting inventory examinations.

Auditors should take in consideration many challenges:

1. Data Privacy and Security: with the increased reliance on digital data, auditors must address ethical concerns related to the privacy and security of sensitive financial information. Safeguarding data against breaches and unauthorized access is paramount.

2. Quality and Accuracy of Automated Systems: as auditors rely on automated systems and AI-driven tools, ethical questions arise regarding the accuracy and reliability of these technologies. Ensuring that algorithms are fair, transparent, and produce reliable results is an ethical imperative.

3. Independence and Bias: the integration of technology will create close cooperation and direct implication with client’s data and ensuring the independence in this situation will suppose supplementary awareness.

4. Transparency and Disclosure: ethical auditors need to communicate clearly about the use of technology in the audit process. Transparency about how data is collected, analyzed, and interpreted ensures that stakeholders understand and accept the methodologies used.

5. Professional Skepticism and Judgment: the digital age requires auditors to exercise professional skepticism and judgment when interpreting complex technological outputs. Striking the right balance between trusting automated results and applying critical analysis is an ethical imperative.

6. Continuous Monitoring: digital auditing often involves continuous monitoring of financial data. Ethical questions may arise about the frequency and depth of monitoring, especially when it involves employee activities, which could impact privacy and trust.

7. Emerging Technologies: as new technologies like blockchain, machine learning, and big data analytics become integral to auditing, auditors face ethical dilemmas concerning their understanding, competence, and ability to audit effectively in these domains.

To narrow the expectation gap, particularly among stakeholders who hold high expectations, especially regarding the utilization of technology, improved data accessibility, and the handling of big data, it is crucial to prioritize transparency in auditors’ actions. This includes a steadfast commitment to ethical standards and meticulous documentation of their work, but also direct contact with clients with transparency and confidence about the quality of work done.

As auditors adopt and integrate technological advancements into their practice, upholding ethical standards takes on heightened significance as it directly impacts the preservation of trust and credibility. By remaining vigilant, adapting to the challenges posed by the digital landscape, and unwaveringly adhering to core ethical principles, TGS members can effectively navigate the digital era while simultaneously safeguarding the integrity of their profession.